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China secures majority of Kenya Adani-type projects
The Nairobi Expressway Mlolongo Toll Station. Under PPP deals, private financiers build roads and recoup their investments through avenues such as tolling.
Chinese firms dominate their foreign peers in the big-ticket projects under the Adani-type public-private partnership (PPP) deals in Kenya, pointing to their deep cash reserves and access to cheap loans from Beijing.
By the end of January, Chinese firms were linked to five projects valued at Sh190 billion, including the country’s first toll road, the Nairobi Expressway, fresh disclosures by the PPP Directorate show.
Companies from the US, the United Kingdom and Portugal came in behind with two deals each in a pipeline of 32 PPP projects as Kenya turns to private money to plug its yawning infrastructure gap.
The bulk of the projects came through privately-initiated proposals (PIP), where the private investors initiate the projects, eliminating the need for competitive bidding in a model similar to the cancelled deals offered to India’s Adani Group.
The increased use of PPPs to finance infrastructure projects aims to reduce reliance on debt and taxes to build roads, airports, power plants and electricity transmission lines.
This shift was expected to affect Chinese firms that have in the past two decades ridden on debt from Beijing to secure mega construction deals like the construction of the Thika Superhighway and the standard gauge railway (SGR).
The state-owned China Road and Bridge Corporation (CRBC), which built SGR using borrowed cash from the Chinese government, now leads the Chinese transition to PPP.
The Nairobi Expressway, built by CRBC at an estimated cost of Sh86.8 billion, marked a significant milestone in Kenya’s use of the PPP model for infrastructure development.
The toll road connects Nairobi’s Westlands area to the Jomo Kenyatta International Airport.
As it has moved to PPP, CRBC has also gone beyond the transport sector for which it has been famous, venturing into new grounds like water supply and dams.
US private equity firm Everstrong—which wants to build the Sh468 billion Nairobi-Mombasa Expressway—has highly valued PPP projects.
The other US firm, Tomorrow i.o, is eyeing a project to enhance weather forecasting by the Kenya Meteorological Department at an unspecified cost.
GBM Limited UK, a British firm, has finished and submitted to the PPP Committee its evaluation for the construction of the Sh337 billion High Grand Falls Dam located between Kitui and Tharaka Nithi counties.
Globaleq Geothermal, the other UK firm, wants to construct the 35 MW Quantum Power Plant for Sh15.21 billion.
Portugal has two road projects valued at Sh14.21 billion.
Parkison Clarke FZE from the United Arab Emirates is linked to one project by the Kenya Ports Authority and wants to establish cargo scanning infrastructure across airports, border posts, and ports in a PIP that is already approved.
Local firms are linked to 10 projects valued at Sh184 billion, mostly in energy and food security projects.
Dr Kennedy Manyala, an economist, reckons that aside from technical know-how, Chinese firms still enjoy heavy financial backing from state banks.
“PPPs require firms that have strong financial backing and technical experience on the subject matter infrastructure project,” Dr Manyala said.
Seven projects have already attained financial close, mobilising a total of Sh140.7 billion in private capital. A big chunk of the fundraising is attributed to CRBC.
Another Sh4.5 billion in private capital was mobilised last year for the construction of 2,340 residential units for the Kenya Defence Forces by the China Railway No. 10 Engineering Company Ltd.
The Chinese firm, which has also been tapped to construct the Kisumu-Vihiga Highway, will develop these residential units for the KDF under a 15-year build, lease, and transfer arrangement.
The KDF housing project is set to deliver housing units in Lanet, Gilgil, Nanyuki, Mariakani, and Nairobi.
CRBC projects in the PPP segment include the Sh35.42 billion Galana Dam in Kilifi County.
The PIP will be crucial for the irrigation of the Galana-Kulalu Food Security Scheme. It is currently undergoing restructuring.
CRBC is also expected to spend Sh13 billion building the Ndarugu 2 Dam Water Supply Project in Kiambu County. The project is still in the feasibility phase.
Sichuan Road and Bridge Group Company Limited Chengdu has bid for the Sh50.6 billion water supply project known as Mzima II.
The project will see the Chinese firm construct a 220-kilometre water supply pipeline to serve consumers from Mombasa, Kilifi, Taita Taveta and Kwale counties.
Under PPP deals, private financiers build roads and recoup their investments through avenues such as tolling.
Public debt went up following years of increased borrowing, making it unsustainable. This emerged in a period when China slowed down lending to Africa from 2019, a shift that was accelerated by the Covid pandemic, leaving a series of incomplete projects around the region.
The reduction in loans was caused by China’s domestic pressures and growing debt burdens among African economies. Zambia, Ghana and Ethiopia have gone into protracted debt overhauls since 2021.
